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International trade and polarization in the labor market

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  • Das, Satya P.

Abstract

The paper builds an argument that international trade can be one explanation behind polarization of employment in the labor market observed in developed countries such as U.K. and U.S. It considers a small open economy, having production sectors which use three types of labor: high-skill, middle-skill and low-skill. The economy faces an increase in the relative price of the high-skill intensive sector. Using decision rules for choosing middle-skill and low-skill education, it is shown that such a terms of trade shock can lead to higher shares of high-skill as well as low-skill workers in the total workforce. The effects off-shoring on wages and job composition are also studied. That of low-skill and high-skill tasks, not middle-skill tasks, is shown to contribute towards polarization in job composition. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2011-48.

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Date of creation: 2011
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Handle: RePEc:zbw:ifwedp:201148

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Keywords: polarization in labor markets; hollowing out; skill biased technical change; terms of trade; off-shoring;

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  13. Arnaud Costinot & Jonathan Vogel, 2009. "Matching and Inequality in the World Economy," NBER Working Papers 14672, National Bureau of Economic Research, Inc.
  14. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE.
  15. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
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